Coastal Community Bank took a $68.8m charge in Q2, due to troubles at an unnamed lending program. I've confirmed LendingPoint is that partner: LendingPoint serves primarily near-prime borrowers, offering unsecured personal loans from $1,000 to $36,500, with terms from 24 to 72 months and APRs from 7.99% to 35.99%. In addition to partnering with Coastal, LendingPoint also works with FinWise, another popular partner bank, as well as originating loans under its own licenses in certain states. LendingPoint previously partnered with Midland States Bank, though Midland wound down that relationship, ultimately selling $87.1 million of LendingPoint-originated loans in December 2024, realizing net charge offs and provisions for credit losses of $17.3 million on the sale, equating to nearly ~20% of the face value of the outstanding receivables. Coastal’s $42.1 million loss in Q2 “is primarily attributable to a $68.8 million credit expense related to a single, isolated CCBX partner relationship,” according to the company’s earnings release. The expense is comprised of a $46 million valuation adjustment to a credit enhancement asset and a $22.8 million provision for credit losses, which, the release said, are “not expected to be fully collected under its indemnification arrangement.” With a total of $1.68 billion of consumer loans outstanding in its CCBX business unit, that $530 million book represents approximately 31.5% of CCBX’s consumer loan book, or 23.8% of its overall CCBX book of about $2.23 billion. It appears that, as of the end of the second quarter, Coastal assessed that LendingPoint wouldn’t be able to fulfill its indemnification obligations, suggesting the financial condition of that unnamed partner — LendingPoint — has materially deteriorated. But LendingPoint's problems shouldn't have been a surprise. Signs of trouble at LendingPoint have included: -a botched "system conversion," which, Midland States Bank said publicly, was to blame for servicing problems and deteriorating credit quality; -significant executive churn, with LendingPoint cycling through multiple CEOs, as well as turn over in CFO, CTO, CRO, CTO, and general counsel roles; -Multiple ratings downgrades from KBRA on the lender's rated asset-backed securitizations; -and a publicly traded business development company treating loans it made to LendingPoint as significantly impaired, indicating it is unlikely to be repaid in full. LendingPoint is hardly the first fintech program to cause headaches or financial losses for its bank partner. With the recently reported news that the FDIC is working with banking and fintech trade associations on a potential independent standard-setting organization, the Coastal-LendingPoint situation provides an interesting opportunity for a thought experiment: is this a scenario that standards should attempt to address? And if so, how? Full story on this in Fintech Business Weekly.